Italy, France, Belgium vulnerable to shocks because of high debt, low growth -EU

BRUSSELS, Nov 26 (Reuters) - The European Union executive
arm warned Italy, France and Belgium that their large public
debts and low potential growth make them vulnerable to economic
shocks, the European Commission said on Thursday .

"The combination of large stocks of public debt and a
declining trend in potential growth or competitiveness is a
source of concerns in a number of countries," the Commission
said in report about France, Italy and Belgium.

The economic situation in the three countries "increases the
likelihood of unstable debt-to-GDP trajectories and the
vulnerability to adverse shocks," the so-called Alert Mechanism
Report (AMR) said.

Italy's public debt is expected to grow this year to 133
percent of the Gross Domestic Product, making it the largest in
the European Union after Greece, Commission forecasts on Nov. 5
showed. It is to ease in 2016 and 2017.

France's public debt is to continue to grow, reaching 97.4
percent of GDP in 2017, the Commission believes. Belgium's debt
is seen peaking at 107.1 percent in 2016, before declining.

Under EU fiscal rules, EU countries must keep public debt
below 60 percent of GDP or reduce it every year by 1/20 of the
excess over 60 percent until they reach that target.

"Structural reforms aimed at unlocking growth potential must
continue or be stepped up, in particular in countries of
systemic relevance like Italy and France," the Commission said.

"Such reforms would help not only to remove growth
bottlenecks, but they would also contribute to support
confidence on the sustainability of fiscal imbalances in these
countries," it said.

French and Belgian potential growth is around or just above
1 percent, roughly in line with the euro zone average.

But Italy's potential growth, the rate at which an economy
can expand without increasing the inflation rate, is negative
and may only become zero next year.

The AMR, published every year by the Commission, focuses on
identifying macro-economic imbalances in the 28 members of the
EU, such high levels of unemployment, excessive current account
surpluses or deficits or private and public debts.

Countries that are persistently showing imbalances and
ignore Commission warning to address them may be eventually
fined, under EU rules.
(Reporting by Francesco Guarascio)